Friday, September 28, 2007

Paying down the national debt: "As required by law?"

Since this is rapidly becoming a right-wing talking point, can someone please point me to the Canadian legislation that requires that any surplus be used to pay down the national debt?

Really, if such a law exists, surely someone can provide a pointer. It's not a tough question.

SURVEY SAAAAAAAYS ... that this "required by law" talking point is pure bullshit. No one has been able to point to a single piece of legislation that "requires" any surplus to be directed in its entirety to the reduction of the national debt.

On the other hand, there's this, which might be what the residents of Lower Wankerville are getting so thoroughly confused by (emphasis added):

Prime Minister Stephen Harper today announced one of the largest reductions in the federal debt in Canadian history and said the resulting effective interest savings will be used to reduce personal income taxes as required by law under the Government’s Tax Back Guarantee.

Well, now, that's enlightening ... the "Tax Back Guarantee" has nothing to do with where a surplus must be applied, only with what must be done with the interest savings, which is (as I'm sure anyone who is not a moron can see) a completely different thing. In short, all this "required by law" nonsense is exactly that -- nonsense, a classic bait and switch. And once again, the Canadian MSM got suckered by it.

I am so not surprised by this anymore.

BY THE WAY, I'm not even going to go looking for which Blogging Tories have been pushing this myth. There's only so much depressing wingnutiness one can handle.

THE READERS WRITE: E-mailer HCT weighs in:

There is no legislation on how any surplus is handled. NO government in it's right mind would enact it because it would tie their hands and the hands of subsequent governments forever ad infinitum ("forever, without limit, to infinity") or until the legislation was either repealed or overridden. Politicians are not fools.

The "Tax Back Guarantee" was contained in the 2007 Budget. Per the Canadian government website, Budget Plan, Chapter 4 (Budget 2007):

A New Approach to Allocating Surpluses

Budget 2006 acknowledged concerns over the transparency of federal budget planning. In Advantage Canada, the Government introduced a Tax Back Guarantee to ensure that all Canadians benefit directly from federal debt reduction through lower taxes. Budget 2007 goes further by proposing to legislate the Tax Back Guarantee. This ensures that as the Government reduces its debt, it will be required to use the interest savings from this debt reduction to lower personal income taxes. Any unplanned surpluses will be applied to reduce federal debt, and all associated interest savings will be used to further reduce personal income taxes. The Tax Back Guarantee makes more transparent for Canadians how the Government intends to use federal surpluses and ensures that such surpluses directly benefit Canadians.

This is only good for the 2007 fiscal year budget and will be overridden, unless repeated by the 2008 budget.

I don't understand all this foofarah. Martin was doing this for years, as finance minister and PM with one exception. He put a whack of money from the surplus against the debt, then took the balance of the surplus and instead of tax breaks, put the money into other government programs (health, equalization etc.)

So, once again, absolutely nothing about paying down the debt with surplus as required by law. Note, though, how Robert McClelland points out that any surplus must go to paying down the debt if that surplus is still sitting around at the end of the fiscal year, March 31. But that in no way constrains anyone from using any part of that surplus between now and then for whatever they want. In short, Stephen Harper is simply lying here.

Don't look so shocked -- you'd think you'd be used to that by now.


Barry Rueger said...
This comment has been removed by the author.
Adam C said...

IIRC, the Liberals put in a law requiring any end-of-year budget surplus to go towards paying down the debt. My interpretation of Harper's comments are that there is a deadline - new spending has to be announced before the last quarter of the year, so that you don't just go throwing cash around at the last minute. By announcing now that there will be no new spending, the surplus therefore must go to the debt.

So Layton is correct, despite the existence of a law.

...although I'm sure you were hoping for something more authoritative than 'IIRC'...

Anonymous said...

adam your wrong Harper has no choice. If he did
don't you think you would see Dion all over the place and scream about it ? The way Layton did!! Dion didn't say anything,because he knows about this law i can't find the link to it i could only find this:
"His announcement means the end-of-year fiscal windfall is no longer available for program spending. The money must, by law, go into national debt-reduction and the interest savings - about $725 million - will go to tax cuts."

It ended this past March 31st,because its the 2006-2007 budget not 2007-2008. The budget that was passed
in March is for 2007-2008.

You can get the rest of the story here !!!

So Harper he really didn't have a choice,did you hear Dion say something about it ? Now whether you believe me or not I don't care I'm just giving you the facts.

Dave said...

Show me the legislation.

The 2006 budget Flaherty produced called for an $8 billion surplus with $3 billion going to debt repayment. There was a line in that document that said the Conservatives would examine putting a portion of excess surplus beyond $3 billion into the CPP/QPP received sup.

That budget was approved by parliament.

So, until someone can produce a piece of standing legislation, I'm not buying it.

I've looked. Not very hard, mind you, but I can't find anything which would have prevented Harper from a redirect of surplus funds.

Anonymous said...

Dave i can't show you the
legislation,because i don't know where to find it? But did you read the link do you think they made it up ? If they did then explain to me the Liberals Dion are mum about it is it possible that Dion the Liberals know about it ? They were the ones who passed it. If you think
that there is no law,then explain to me why the liberals are not saying anything about it? Will you please?
Did you read that link Dave?

thwap said...

Dioon and the Liberals can't say much because they pulled this sort of shit all the time.

And the CCPA consistenly provided accurate estimates of what Martin's, and now Harper's, surpluses would be.

So it's not like these were genuine surprises to any government.

Lindsay Stewart said...

sweet mother of fuck. do you even have a first language over there where "it" is at? you haven't given us facts. you admitted you could not find facts. you repeated a story from the sun media group, repeating harper citing some mysterious law. perhaps dion doesn't share layton's feelings regarding this debt reduction scheme. the fact that layton went after this story indicates that he either disagrees with the fiscal constraints of this law or that there has been one of those rubbery readings of said law by the notoriously shifty cons.

most large organizations have a use it or lose it provision in their budgets. this money did not just appear at the end of the fiscal year. clearly, had mr. harper desired to make use of some of those funds, he had plenty of time before this deadline consigned it to the debt. just as clearly he did not care to turn any of these funds toward social programs or to make good on his own election promises, ie daycare placements.

thus we can infer that harper and his conservative government are willing to lie to parents to win an election, and turn their backs on young families and children when it comes time to dole out the prizes. $725 million in tax cuts. screw your thinking cap on over there where "it" is at. who, just who, might be in line for those big tax windfalls? the working class? no no no. the middle class? no no no. watch for the oil patch to collect some incentives and breaks, you know it's coming. look for the richest 1% to belly up to the taxpayer's trough to slop down more than their share.

face it, these mythical tax cuts don't benefit the needy, they always go to pay off the needless.

Anonymous said...

Tell me why Dion and is
Liberals are not complaining then if it is not fact ape?

Anonymous said...

People you know what believe what you want ,because your just a bunch of boneheads anyways ADIOS !!!!

Lindsay Stewart said...

perhaps, my illiterate gnome, mr dion and the liberals do not disagree with the application of these funds to the purpose of debt reduction. or perhaps they are waiting to see which way the popular wind blows, now that the ndp have made a stand. these are politicians we're talking about, after all. layton has stated a position, if the polls slam him, dion loses nothing by his silence. if however, the polls show popular support for layton's position, dion can come roaring in and still lose nothing by smacking harper and his band of con jobbers upside the head.

Sparky said...

I have no idea about previous legislation.
However, what I have noticed is this--
"His announcement means the end-of-year fiscal windfall is no longer available for program spending. The money must, by law, go into national debt-reduction and the interest savings - about $725 million - will go to tax cuts"
725 million to tax cuts.
No matter what we find out about legislation and paying off the debt--it seems that Mr Harper is using whatever monies he thinks he can to reduce taxes instead of reinvesting in all those 'librul' gov't programs.

Dave said...

Did you read that link Dave?

Yeah, I did. Yesterday. It's a news report and it's not substantiated. From Sun Newsgroup, no less.

Show me the legislation. Your link proves nothing.

Now... did you read the 2006 Budget Plan? All of it. You can find it and a few other links to Conservative party trip, right here.

Don't let the length of the documents deter you from reading them in their entirety.

Lindsay Stewart said...

dave, i have the feeling that mr/mrs right is where its at would find an overlong menu a deterrant. all that low functioning and all.

That guy said...

Well, here's a funny thing:

TORONTO -- The Harper government announced it ran a larger-than-expected budget surplus of nearly $14-billion last fiscal year and immediately pledged to return $725-million of this to voters as tax breaks.

So, if there is such a law, then it would appear that Harper is breaking it anyway by setting aside some of that surplus for something other than paying down debt.

thwap said...

Harper knew about this surplus, as Paul Martin knew about his.

The fact that the CCPA could, year after year, accurately predict these surpluses shows that this government and past Liberal governments have been duplicitous.

And, as Layton says, ... it's like ploughing everything into the mortgage and keeping the kids out of college and not buying needed medicine for the grandparents in order to do so.

And as the mostly morons at the Glib & Stale comments section and "therightiswhereimbecilesareat"show, ... Canadians are a bunch of fucking chumps.

That guy said...

Seriously. I have thought for some time that the G&M would do Canada a great service by shutting down its comments sections. They do nothing but increase the country's level of ambient stupidity.

Ti-Guy said...

So, if there is such a law, then it would appear that Harper is breaking it anyway by setting aside some of that surplus for something other than paying down debt.

I think Harper explained that the 750 million is the savings on debt servicing (interest) which he can now direct to tax cuts.

Unknown said...

I cannot find a law, but I remember something authoritarian about the surplus. From the book "How it works" by Eddie Goldenburg

pg143: "The problem for the government is that the federal budgets only operate in individual fiscal years. Accounting rules as enforced by the Auditor General require that surpluses at the end of the fiscal year must automatically be applied agaist the national dept. Extra money cannot be rolled over into the next fiscal year either for investments in program that are priorities for Canadians or for tax cuts. Compounding the problem is the fact that it takes several months after the end of the fiscal year before the books are finally closed."

pg144: "I tried with no success to persuade the Department of Finance to find ways of providing flexibility for dealing with unanticipated surpluses. The Martin government actually introduced legislation to that effect in 2005 but was defeated before the bill was adopted."

btw Canada is the only G-7 country to have this many consecutive surpluses (10!!). That is something to be very proud of IMO - and to encourage in our politicians.
* 2006/07 $14B
* 2005/06 $13.2B
* 2004/05 $1.6B
* 2003/04 $9.1B
* 2002/03 $7B
* 2001/02 $8.9B
* 2000/01 $18.1B
* 1999/00 $12.7B
* 1998/99 $3.1B
* 1997/98 $3.8B

Robert McClelland said...

The fiscal year ends on March 31st. If there's any revenues that the government hasn't spent by that date, it's required by law that it be used for debt repayment. I don't know exactly where this is in the legislation but it is law. We're already 6 months past the `06-`07 fiscal year so the money from Harper's first budget is no longer available to the government.

The only way it would have been possible to use the money after the close of the fiscal year is if Parliament had passed Goodale's Surplus Allocation Act back in `05. This act would have seen one third of the surplus given back to the taxpayers, not as a tax cut but as a rebate, one third used for a one time increase in program spending and the remaining third used to pay down the debt. Nobody liked that idea at the time however.

Now what Layton is talking about is that the surplus should have been used prior to the end of the fiscal year. This surplus wasn't exactly unexpected. Flaherty's second budget, the `07-`08 one, was already forcasting a surplus of about $9 Billion. The only thing unexpected was the final size of it as determined by the final audit; which is what was just released to the public. And yes it was Harper's decision to allocate all of the surplus to debt repayment. He could have, just as Martin did in `04-`05, used some of the anticipated surplus for other purposes prior to March 31 of this year.

Unknown said...

Also, from the Financial report:

"The decline in federal debt between 2005–06 and 2006–07 was largely due to an increase in financial assets.

The reduction in the federal debt results in effective interest savings that will be passed on to Canadians through personal income tax reductions under the Government’s Tax Back Guarantee."

So the 750 million is from the interest saving by placing that money on the debt (it is not from the suplus money, that all goes to national debt).

Also, a large part of it was from unexpected increases in income - specifically they mention corporate tax increases as a large source of money.

Also, the budget allocated "X in expected surplus" because they knew that breaking the consecutive surplus streak would be very very bad.

I might as well grab another quote from How It Works since it is still sitting beside me:
"Forecasting the budgetary surplus isn't an exact science. Domestic and international economic circumstances change in the course of a year, so it is impossible to make completely accurate forecasts. With annual federal budgets close to $200 billion, a small error in forecasting implies billions of dollars, in one direction or the other."

So, they looked at the chance of guessing wrong (probably ~5billion either plus or minus) and added a little more to be safe (hence the guessimated 9billion mentioned in the initial budget papers).

I normally lean NDP but in this case I think Layton made an error. The Conservatives (which are conservative) made a budget, knew that not having a surplus would definitely lose them many votes, guessed at an approximate surplus and than added a couple billion to be safe.

syncrodox said...


The surplus amounted to about 3% of the total budget. Now if it were 3% the other way I can imagine the screaming. Perspective.

The debate here seems to be that not enough of the surplus is going to social programs.

Do any of you economists know what the national debt stands at?

Any idea how it got there?


CC said...

Syncrodox tries desperately to change the subject:

"The debate here seems to be that not enough of the surplus is going to social programs."

No, syncro ... the debate (as most semi-literates can see right in the very title of this posting) is whether the entire current surplus must be applied to the national debt "as required by law."

You think you can keep up here, hmmm?

Ti-Guy said...

I think Syncro needs to go golfing (or fishing) some more. He's really out of his league.

What is it about stupid people that makes them believe they understand things? Oh, right...Dunning-Kruger.